What: Add an option under Loan Product > Internal Controls > “Cap Arrears Accounts when Interest, Fees, Penalties ….” that will determine if the Capping should be:
(a) “soft” - the account would be locked AFTER posting the transaction (Interest, Fees, Penalties Applied) that is causing the account to reach the cap (current behaviour)
(b) “hard” - the account would be locked BEFORE posting the transaction (Interest, Fees, Penalties Applied) that is is causing the account to reach the cap (new behaviour)
- with “soft” (partial) capping, any charges that become due will be applied first, then the account would be locked so that no new charges apply (as a result, the account could be slightly over the capping limit)
- with “hard” (full) capping, no charges apply if they bring the account over the capping limit
Why: In order to comply with legal requirements, some organisations may not be allowed to recognise any Interest, Fees or Penalties if they exceed the capping limit, even by very little.
For example, in the event there is let’s say £995 of interest already charged on a loan, and a transaction of £10 interest accrued is to be applied - it should not be applied at all. If the total of £10 was applied - that would be a breach of legislation.